(An article of Louis Even, first
published in the April 15, 1956 issue of the Vers Demain Journal.)
Do you have a bank account?
Yes. Oh! not a big one; just a few hundred dollars.
Do you use it sometimes to make payments?
Yes, when I buy something very expensive, or when I order goods from
afar. Then I make out a cheque. It's very convenient.
In fact, it's so convenient that more than 90 percent of all business
transactions are carried out by means of cheques not trivial
purchases at the corner store, but the transactions of the wholesalers,
the industrialists, the transport companies. The cheque is by far the
chief means of payment today; it has relegated to a minute place coins
and paper money.
Yes, but when one issues a cheque, it is the bank that pays on behalf of
the issuer. For each cheque issued, there must be a corresponding amount
of metal or paper money that the banker will hand over to the payee.
Nothing of the sort, my friend. Only a little money is required to cover
a great many cheques. The retailer, to whom you are issuing a cheque,
hardly ever asks the teller of his bank to give him cash money for the
amount specified on the cheque. He simply deposits the cheque. The
credit in his account increases by the amount of the cheque deposited;
and your account, on the other hand, is debited or decreased by the
amount of the cheque.
when a retailer orders merchandise from suppliers, he pays by cheques.
The suppliers will deposit the cheques they received at their banks.
This time, it is the suppliers' accounts that will increase, and the
retailer's account that will be decreased by the amount of the cheques.
these transactions involve nothing more than the transferring of amounts
from one account to another; debiting one account and crediting another.
in all, for every cheque of $100, there is no more than $10 in coins or
paper money that goes beyond the teller's wicket at the bank. This is
the proportion in use in present-day business practices, and the banker
knows this very well. As a result, the banks are able to lend ten times
the amount of money they actually have.
Eh, what are you saying? How can a banker lend money he doesn't have?
Simply by creating the money he lends out. This is the common practice
of the banks. They create the money that they lend out. A banker is
essentially a money creator.
That's unbelievable! I just don't get it!
Well, my friend, you told me that you have a small bank account. Now
this account is made up of your savings, isn't it?
Yes, it is money that I brought and deposited in the bank.
Fine! But there are people who come to the bank without a cent, and
leave with a bank account much bigger than yours.
I don't understand.
No? Well, let's take the example of Mr. Jones, a manufacturer in your
town. He wanted to enlarge his factory. Everyone thought it was a good
idea. But Jones doesn't have the money to pay for the materials, the
builders, and the machinery. He figured out that with $100,000, he could
carry out his plans; later on, with increased production and sales, he
could easily pay back the $100,000.
did Jones do? He went to the bank. He did not bring money with him to
the bank. But he came out of the bank with $100,000 in his account.
Of course, he borrowed it.
Exactly! The wonderful thing about it is the way the bank made the loan.
If you were rich, and Jones had come to you to borrow the $100,000, he
would get his $100,000, but you would actually have $100,000 less in
your account. At the bank, it's quite different: Jones comes out with
the $100,000 he needed, but the bank doesn't have one penny less.
You don't say!
It's the gospel truth. Oh! of course Jones must give some sort of
security. He has to deposit collateral. Not money, because he did not
have any that's what he came to get. He is perhaps asked for
insurance policies or titles to property for a total value exceeding the
$100,000. These are called guaranties, or collateral. Then the manager
gives him a discounting cheque to the amount of $100,000, and sends him
to deposit it with the bank teller.
Jones is not going to ask for $100,000 in paper money, and walk out of
the bank with this money on him. He deposits the cheque in his account.
The amount is credited to him (just as for you when you deposit your
savings). Mr. Jones leaves the bank with credit on which he can issue
cheques to pay his bills, as the construction progresses. He thus puts
this money into circulation. But he pledged to withdraw this money from
circulation, and to pay back the whole amount within one year's time.
And you say that the banker hasn't any less money than he previously
convince you, we can go and have a chat with the bank manager. He's a
friend of mine, and he is quite frank with me. Besides, he knows I'm
acquainted with the details of the Jones' loan, and that he won't be
violating professional secrecy.
Mr. Manager, here I am again to tease you about banking as is my
More questions about credit?
Right. It's that $100,000 loan that you made to Jones. Will you mind
telling my friend here exactly what you loaned to Mr. Jones?
What we lend every day money.
Indeed. But tell us then, where was this money before Jones entered the
Now that's a silly question.
Not at all. Jones came in without any money. He left with $100,000. Now,
you got this $100,000 from somewhere. Is some part of the bank short by
Is there $100,000 less in the teller's drawers or in the vault?
Come on, he did not take dollars with him. It was credited to his
Good. Then some other accounts were depleted to the tune of $100,000.
The accounts of some of your clients perhaps?
That's ridiculous! Our clients' money is sacred. Their accounts remain
intact, unless they make withdrawals from them.
What? It's not the depositors' money that the bank lends out?
Yes! No! Well, yes and no. In one way, yes; in another, no. We don't
touch their money; it's theirs. But that money permits us to lend out
money to borrowers.
Then what money do you lend out?
The bank's money.
But you have just said that not one cent of the bank's money goes out of
the bank, and the clients' money either. And yet, Mr. Jones has $100,000
that he did not bring, and that he did not have before entering the
All right. Now, where was this $100,000 before Jones came into the bank?
Well, it wasn't anywhere. He had to come in and borrow it before it
It didn't exist before?
And now it does exist!
Certainly. Because it's in his account.
So it came into being the minute Jones got his loan. The bank creates
the money it lends.
Well, I wouldn't like to say that.
But your big executives have said it quite explicitly. Towers said it
when he was the Governor of the Bank of Canada. Eccles said it when he
was the head of the banking system in the United States. Fifty years
ago, McKenna, then head of the largest commercial bank in England, said
it when he was talking to some bankers. So you have no reason to be
scrupulous. Banks create the money they lend. Besides, money has to come
from somewhere, doesn't it? All the Government tells us is that it is
not they who create money. They're quite satisfied with levying taxes.
The wage-earners content themselves with sweating. The industrialists
content themselves with producing. And no money ever comes out of their
machines. It comes from the banker's pen.
not angry with you, Mr. Manager. In fact, we're quite happy that modern
money can come into existence so easily. But what we don't like and
you are no more to be blamed for this than a private soldier is to be
blamed for the war is the fact that the banking system considers
itself to be the owner of the money it creates, whereas this money
really belongs to society.
Please explain this assertion.
Just consider the facts. Without the existence of a producing society,
without an organized economic life, this money would be worthless. It is
the wealth of a country, its natural resources, the work of its people,
the techniques of production; it is all of these things which confers
value to the $100,000 that came out of your pen to Mr. Jones.
You forget, Sir, that Mr. Jones deposited first-call securities before
he got his loan. That's where the $100,000 get its value.
No, Mr. Manager. This collateral deposited by Mr. Jones is a guarantee
that he will repay you. If he doesn't, you keep the collateral. But do
not confound the guaranties of the loan with the value of money. If
there were only these guaranties in the country, if there were no
production, no farms, no factories, no transportation, no stores, no
economic life, that $100,000 would have no monetary value, regardless of
how much security Mr. Jones might deposit with you.
is the whole country, all the country's wealth, all the country's
population, that gives value to money, no matter by what body or
organism money is created. Consequently, by reason of its basic origin,
money actually belongs to the population of the country. Lend it to Mr.
Jones to enlarge his factory if you wish. But it is the country's whole
population that must benefit from this loan, and not the banks alone.
Instead of bringing in interest to the banker, the development of the
country must provide dividends to the whole population.
cannot denounce too strongly the bank's appropriation of the credit of
society. It is the greatest swindle of all times and the one most
firmly entrenched in all civilized countries. Its strength and
universality in no way justify it, but only make it more odious.
public debts municipal, provincial, federal have their roots in
this gigantic swindle. The people build up the country. But the system
only plunges them into debt as they build.
bodies, governments, do as Jones did they borrow. Their guaranties
are bonds, mortgages on our homes, promises to tax the population.
are small stuff compared to the financial powers.
Social Credit can liberate individuals, families, and public bodies from
this tyranny, which has no concern for the well-being of humanity.